PI in the sky: TASA regime could cause insurance problems

It’s vital that we sort out questions surrounding the looming TASA regime before it comes into legislation on 1 July, say industry representatives.

Both Dante De Gori of the Financial Planning Association (FPA) and Michael Pinn, who is consulting with the Tax Practitioners Board (TPB) on behalf of the Association of Independently Owned Financial Professionals (AIOFP), told Wealth Professional of concerns and uncertainty surrounding the regime.

Pinn’s major concern stems from the potential repercussions that having to register as a tax financial advice provider could have on Professional Indemnity (PI) insurance.

The majority of the policies Pinn has seen contain a specific exemption from giving tax advice, he said. This could potentially see advisers needing to change their policy, which could have an impact on premiums.

“I’d be very surprised if there’s not a 10-15% premium increase – they could double, who knows?” he said.

Failure to ensure PI insurance covers tax advice will also see advisers in breach of the legislation.

Pinn said the TPB have talked to two major Australian insurers who have agreed to cover changes in PI insurance, although they didn’t indicate what it could cost.

Another major insurer remains undecided, he said.

A video released by the TPB last week that looks again at who will need to register as a tax financial adviser begs more questions than it answers, said Pinn.

“The video is very helpful but it doesn’t tell you the whole story. I find it hard to believe how [all advisers] wouldn’t be caught up in [the regime] one way or another.”

FPA’s De Gori agrees there are still many questions left unanswered, and he is concerned there won’t be enough time to resolve potential issues before the July 1 deadline.

“What was missing in the video is clarification about what’s still outstanding,” he said. “What we don’t know are the education and training requirements. It’s not ideal that we don’t know. There is a transition period but we’re running out of time and it does create a lot of uncertainty.”

De Gori said the FPA are pushing those involved for more clarity and are exploring if there are different options that could be offered.

These could include changing the TASA timeframe, or potentially providing relief to the industry given how long the process has taken.

He said the TPB have been very open and helpful throughout, however the education and training provisions are out of their hands as they are dealt with at a Treasury level.

The PI Insurance concern is something the FPA are keeping a close eye on, De Gori said.

“It’s definitely something that needs to be watched. We’ve had discussions with the Insurance Council of Australia and there seems to be a consensus that what financial advisers will be doing after the regime won’t be different to today,” he said. “But in saying that there will be some policies where there will be specific exclusions and PI operators will decide if there is a premium change as a result.”

The FPA launched a TASA toolkit - which includes webinars, online archives, and a national roadshow that goes through until June - to help advisers understand the issues and address any questions they may have.